Publications

A recent decision by a New Jersey Superior Court Judge may pave the way toward more and more medical malpractice cases going to mandatory arbitration rather than to jury trials. But, will this result in a decrease in the cost of malpractice insurance?

New Jersey Physicians is carefully monitoring the trend and communicating with its Medical Malpractice Defense Review Panel to help physicians and their insurers decide whether arbitration is a better solution.

In a recent decision, a federal district court judge, in the case of Moore v. Fernandez, upheld a provision in a contract between a physician and his patient which required binding arbitration of a malpractice claim. The arbitration provision was incorporated into forms signed by the patient on an initial visit to the physician’s office, and was drafted by a risk retention group that provided the physician with malpractice insurance.

The court relied on both the Federal Arbitration Act which mandates enforcement of arbitration clauses in contracts and its interpretation of New Jersey State contract law. Relying on precedent in other types of cases, the court found a strong public policy favoring arbitration, founded upon the belief that arbitration offers a less expensive and more efficient way to resolve disputes, and unburdens the court system.

However, it may still be a while before jury trials become obsolete. While the Federal Arbitration Act provides that “states may regulate contracts, including arbitration agreements, under general contract law principals,” one long recognized principal is that “contracts of adhesion” will not be enforced. A contract of adhesion is a contract which gives one party no opportunity to negotiate or reject the contract’s terms, and imposes conditions which are generally viewed as against public policy. Thus, a right to a civil trial can generally be waived only if the waiver is knowing and voluntary. To be knowing and voluntary, a party must understand the nature and scope of the right that is being waived. Many argue that a patient cannot competently assess the extent of what is at stake when waiving a right to a jury trial resulting from future medical treatment, and because of this, lacks the requisite ability to “knowingly and voluntarily waive” the right to a jury trial.

The risk retention group involved in the Moore case requires its physicians to have their patients sign contracts which include mandatory arbitration clauses, before treatment is provided. To try to overcome the risk that a court would view the contract as one of adhesion, the contract includes language that allows the patient to “opt out” of the arbitration agreement within fifteen days, and advises the patient to consult an attorney. The Moore court held that this “opt out” provision did, in fact, demonstrate that the patient was not compelled to accept the arbitration provision and could have sought further care elsewhere. It did so even though there was no evidence that the patient consulted an attorney, or that the plaintiff paid any attention to that language in the contract. Whether the New Jersey State courts will come to a similar conclusion remains to be seen.

Even if arbitration clauses are ultimately held to be valid in New Jersey, many malpractice insurance carriers remain skeptical of the benefits of arbitration. Though the common wisdom suggests that arbitrators will be more favorable to physicians than juries, most of the evidence is purely anecdotal. One concern is that New Jersey’s experience with arbitration in other arenas suggests that arbitrators remain sympathetic toward plaintiffs. A second, and much greater concern, arises from the fact that large numbers of malpractice claims are never brought because it is so expensive to litigate through our court system. By making it less expensive to litigate, insurers fear that more cases will be brought. This could result in more judgments against doctors. As such, even if the average award decreases, and the occasional “runaway jury” becomes a thing of the past, the total cost of defense and indemnity could increase – and that translates to even higher malpractice insurance premiums.

New Jersey Physicians urges physicians to carefully consider the use of arbitration clauses and to only employ them with the permission of their malpractice insurer. Use of these provisions without the approval of your carrier could potential void coverage.

For more information about New Jersey Physicians and the many benefits it offers, visit www.njphysicians.com or call 888‐806‐5362. Also, look for New Jersey Physicians’ Annual Report, coming to you soon.